Balance Scorecard Literature Review

REVIEW OF RELATED LITERATURE

2.1 Introduction

This chapter focuses on discussing the relevance of the study in the existing literature that is what other scholars have written in relation to the topic under investigation: An assessment of BSC implementation in Wag hemer zone administration public organization The chapter will be presented under subtitles; Theoretical frame work, empirical review and conceptual framework.

2.2. Theoretical framework

2.2.1. Definition of Balance scorecard

The Balanced Scorecard (BSC) is a management system that enables organizations to clarify their vision and strategy and translate them into action. When fully deployed, the Balanced Scorecard transforms strategic planning from exercise into the nerve centre

The Key Benefits of using Balanced Scorecards

• Better Strategic Planning – The Balanced Scorecard provides a powerful framework for building and communicating strategy. The business model is visualised in a Strategy Map which forces managers to think about cause-and-effect relationships. The process of creating a Strategy Map ensures that consensus is reached over a set of interrelated strategic objectives. It means that performance outcomes as well as key enablers or drivers of future performance (such as the intangibles) are identified to create a complete picture of the strategy.

• Improved Strategy Communication & Execution – The fact that the strategy with all its interrelated objectives is mapped on one piece of paper allows companies to easily communicate strategy internally and externally. We have known for a long time that a picture is worth a thousand words. This ‘plan on a page’ facilities the understanding of the strategy and helps to engage staff and external stakeholders in the delivery and review of strategy. In the end it is impossible to execute a strategy that is not understood by

Typical examples might include customer satisfaction or revenue. Although these measures are usually quite objective and accessible, they normally lack any predictive power. Lead indicators are the performance drivers that lead to the achievement of the lag indicators.

Thus, Strategy is an integral element of a BSC framework which suggests that the foundation of measuring organizational performance should be derived from its vision and strategy (Niven 2003). The BSC has the goal of providing management with a framework, a way to translate the goals of the organization as well as the company‘s vision into a comprehensible set of performance enhancing measures (Kristin et.al, 2009).

According to Niven (2006), 60% of the fortune 1000 companies are either implementing or attempting to implement the BSC. Further, a study conducted by Bein& Co (2009) States that about 49% of organization in North America, 54% in Europe, 52% in Asia, and 56% in Latin America use the BSC. Due to its wide acceptance and effectiveness the BSC was proclaimed one of the 75 most influential ideas of the twentieth century by The Harvard Business Review (Niven 2005, 2006 as cited in Pujas